Occupancy boost pushes up profits
by Andrew Sangster
Profits for UK hoteliers boomed during 1994, according to two authoritative reports published last week. And, while giving different absolute figures, both reports recorded big rises in occupancy levels.
But BDO Hospitality Consulting, in the United Kingdom Hotel Industry 1995 study, warns that the substantial rises in bedroom occupancy have been tempered with stable, or only marginal, increases in average achieved room rates.
BDO managing director Trevor Ward said: "As a result of economic recession, hotel customers have become much more discerning and knowledgeable about their ability to secure discounts.
"It will be some time before hoteliers are able to achieve the significant real increases in average daily rate that were common in the late 1980s."
The other report, Outlook UK Trends 1995, produced by Pannell Kerr Forster Associates, states that on average operating profits in UK hotels went up by 17.1% during 1994. And PKFA is predicting a further rise of 14% in the current year.
But the PKFA figures show that profits growth is not evenly spread. During 1994, London hotels showed the biggest improvement, at 21.8%, while Scotland's hotels showed a rise of just 9.8%.
The average income before fixed charges across the sample of 295 hotels was £9,824 per available room. London led the way with income of £15,415 per room.
The better profits performance was driven by much stronger levels of occupancy. The average bedroom occupancy rose 5.1 percentage points to 69.8%.
PKFA chairman Alan Hopper said at the launch of Outlook UK Trends 1995 that the gradual improvement in the UK economy had clearly filtered through to the hotel business.
"Although conditions remain tough and highly competitive, the prospects for this year and next look positive," he added.
The difference in figures produced in each report is a result of different hotels being used in each sample. The 303 hotels that contributed to BDO's study had an average bedroom occupancy 4.8 percentage points lower than in the PKFA report.
The variation, however, is not so important as the general trend. The good news is that both reports show convincingly that 1994 was a much more profitable year than 1993.
BDO's study shows gross operating profits moving up 17.9% from £6,369 to £7,510 (median averages), a figure close to the rise in operating profits for the properties participating in the PKFA report.
- United Kingdom Hotel Industry 1995 costs £125 from BDO Hospitality Consulting, tel: 0171-486 5191. Outlook UK Trends 1995 costs £250 from PKFA, tel: 0171-831 7393.
